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"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

Happy Thursday…Negotiations are underway for deals to be announced around President Trump’s November visit to Beijing. Several sources have told Sinocism a PRC Vice Minister of Commerce is in DC this week and Commerce Secretary Ross is scheduled to go to China September 24-25 as part of these preparations.

The Essential Eight

1. Preparing For Trump’s November China Trip

Comment: Will National Security Advisor McMaster and his senior director for Asia Matt Pottinger travel to Beijing before the trip? Secretary Ross is doing the business deals part, he can’t be the right person for the whole visit, nor would I expect the Chinese to accept him as such.

Douglas Paal, vice-president for studies in the Asia programme at Carnegie Endowment for International Peace, has said John Kelly, the White House chief of staff, did not think Kushner would be an appropriate channel even though he had helped to establish contacts between Chinese and US officials in the past…

Wu Xinbo, director of Fudan University’s Centre for American Studies, said the meeting between Yang and Kushner indicated that China still paid high regard to his role in Sino-US relations even though he did not come to China.
“Yang’s visit showed that China continues to attach importance to Kushner’s significance in the Trump administration,” he said. “But because of procedural issues, he might remain behind the scenes.”

Wang Yiwei, an international relations expert from Renmin University in Beijing, said Kushner was facing increasing pressure in the US…

“Kushner himself is not in the right position if the planned trip was to prepare for President Trump’s China visit, since the job is traditionally done by the US Secretary of State or National Security Adviser,” he said.

Comment: The Commerce Department is looking for applicants to join the trade mission around President Trump’s November trip to China. I am hearing that there is less CEO enthusiasm to join this trip than in previous years given CEO worries about being too closely associated with President Trump. True, or partisan grumblings?

United States Secretary of Commerce Wilbur Ross will lead a Trade Mission to China in mid- November 2017. This multi-sector mission will promote U.S. exports to China by supporting U.S. companies in launching or increasing their business in the marketplace, as well as address trade policy issues with high-level Chinese officials. Key elements will include business-to-government and business-to-industry meetings, market briefings, networking events and opportunities to promote new deals and agreements between mission participants and Chinese entities through signing ceremonies…

If you’re interested in participating in the upcoming mission, we encourage you to submit complete an application at: https://www.commerce.gov/ChinaMission2017Application

It was just the fourth time in a quarter century that a U.S. president has ordered a foreign takeover of an American firm stopped because of national-security risks. Trump acted on the recommendation of a multi-agency panel, the White House and the Treasury Department said Wednesday. The spurned buyer, Canyon Bridge Capital Partners LLC, is a private-equity firm backed by a Chinese state-owned asset manager

Next Move: Canyon Bridge is trying to buy a UK chip firm, and structure the deal to avoid UK regulatory issues.

Canyon Bridge, which says it’s based in Silicon Valley with an office in Beijing, is keen to structure a bid to avoid scrutiny from U.S. regulators, said the people, who asked not to be identified because the matter is private. The company’s $1.3 billion purchase of Portland, Oregon-based Lattice Semiconductor Corp., whose programmable logic chips are used in military communications, is being opposed by U.S. national security officials, and President Donald Trump is considering whether to block the deal.EU foreign investment review raises bar for China – Reuters:

The European Commission is raising the investment bar for China. Brussels has come up with a pan-European scheme to vet sensitive purchases by other countries. Unlike the government committee that scrutinises acquisitions in the United States, its rulings will be non-binding. Even so, the People’s Republic will find it harder to buy European infrastructure and technology.

3. China To Shutter Bitcoin Exchanges

Breaking: China Business News reported Thursday afternoon that is learned for authoritative sources that the domestic bitcoin exchanges have been ordered to stop trading.

Sun Guofeng, head of the PBOC finance research institute, defended the ban following some criticism that the move was extreme. It was the first time the central bank explained its policy stance on the record in public.

He argued that blockchain is not — and should not be — just about cryptocurrency. Outlawing ICOs should not stop financial-technology firms from researching and developing blockchain technology that can be used in a wide array of applications unrelated to cryptocurrencies, he added.

Yu Zhengsheng, chairman of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), made the remarks while addressing a two-day symposium on the region’s historical issues, which closed Wednesday.

Yu emphasized that Xinjiang is an inalienable part of Chinese territory, and that China has been a unified and multi-ethnic country since the Qin and Han dynasties more than 2,000 years ago.

He pointed out that the various ethnic groups in the region are members of the Chinese nation, and share the common interest of realizing the Chinese dream of national rejuvenation.

Fixed-asset investment, a key growth driver for the world’s second-largest economy, grew 7.8 percent in January-August from a year earlier, the weakest pace since December 1999 and cooling from 8.3 percent in January-July.

The value of new homes sold rose 3.8 percent to 807 billion yuan ($123 billion) in August from a year earlier, according to Bloomberg calculations based on data released Thursday by the National Bureau of Statistics. That compares with a 4.3 percent jump a month earlier, and is the slowest increase since November 2014.

Officials blamed August’s slowdown on bad weather but economists say a clampdown on credit, a cooling property market and waning effects from previous stimulus measures may have all dampened domestic demand. “Today’s data are indeed below our expectations. It shows that China’s domestic demand may not be as strong as previous economic indicators suggest,” said Tommy Xie, an economist at OCBC.

China generated 594.5 billion kilowatt-hours of power in August, up 4.8 percent compared with the same month last year, as the volume of electricity produced from all sources increased, data from the National Bureau of Statistics showed on Thursday.

China will press ahead with the supply-side structural reform with more efforts focusing on reining in excessive production capacity, reducing corporate cost and improving environment for innovation. The decision is made at a State Council executive meeting chaired by Premier Li Keqiang on Wednesday, after hearing a report on the fourth round of State Council nationwide inspection. The inspection, conducted by the State Council General Office in two phases between June and August, is aimed to ensure that the tasks put forwarded by the central economic work conference and the Government Work Report be implemented in full.

Crude steel output climbed to 74.59 million metric tons last month, surpassing the previous peak of 74.02 million in July, and up from 68.57 million in August 2016, according to the statistics bureau Thursday. While that’s an all-time high for the month, daily output was less than the record in June. Production surged 5.6 percent to 566.4 million tons in the first eight months, also a record.

Meanwhile, the Chinese delegation told the US side that China had actively taken measures to cut steel overcapacity, Zhu said, citing China’s plans to reduce steel capacity by 100 million to 150 million metric tons from 2016 to 2020.

That confidence may be misplaced. Investors are overlooking two shortcomings in China’s approach. The first is the nature of top-down diktats about supply, which lack flexibility and therefore tend to generate volatile outcomes. China wanted to puff up prices. But the surge that it has caused has gone well beyond what it intended, raising concerns that high prices will lead once more to surplus capacity. Local officials, still hungry for growth, have dusted off their plans for big new coal mines. Officials have started to warn about a speculative bubble in the steel market. In Chinese ports stocks of iron ore, a vital ingredient in steelmaking, are near record highs.

7. Combatting CCP Influence Operations Should Not Be Conflated With Anti-Chinese Racism

Background: FT Asia editor Jamil Anderlini writes about the risks to the West from CCP influence operations and addresses the inevitable claims that any pushback is really just anti-Chinese racism. There is a real risk that a backlash will go too far, just as there are real risks if the CCP activities are left unchecked. Beijing will certainly want people to believe that racism is behind it, and in fact may not be unhappy to see nasty anti-Chinese backlashes as the mandarins may believe such nastiness might push Overseas Chinese closer to the Motherland.

It is also true that many western countries, including New Zealand, have an uncomfortable history of racism towards immigrants from certain places, including China. But it is hard for Mr Yang to argue he is being targeted because of his ethnicity rather than the decade he spent training and teaching in some of China’s top military and intelligence institutions. The fact he has consistently advocated international policies that match those of the People’s Republic of China, and that he appears to work closely on many issues with the Chinese embassy in New Zealand, makes his military intelligence background even more relevant…

If anything, the Chinese intelligence apparatus should take responsibility for fomenting anti-Chinese sentiment abroad through its relentless attempts to recruit ethnically Chinese agents in target countries

Three primary Chinese government agencies oversee its “united front” activities abroad: The Communist Party Central Committee’s United Front Work Department (UFWD), the State Council’s Overseas Chinese Affairs Office (OCAO), and the State Council’s Taiwan Affairs Office (TAO). Nominally “non-governmental” front organizations for these agencies include the China Council for the Promotion of Peaceful National Reunification (CCPPNR), the China Overseas Exchange Association (COEA), and the China Overseas Friendship Association (COFA), all led entirely by Chinese Communist Party officials.

Liu Changgen, deputy director of national environmental inspection office, said it will dispatch 100 enforcement teams to fight air pollution around Beijing. A qualitative assessment will be introduced for the first time on officials. If cities fail to meet annual air quality improvement targets, the Communist Party chiefs, mayors and vice mayors will be held accountable, Liu said.

Asia’s glaciers to shrink by a third by 2100, threatening water supply of millions | The Guardian Asia’s mountain glaciers will lose at least a third of their mass through global warming by the century’s end, with dire consequences for millions of people who rely on them for fresh water, researchers have said. This is a best-case scenario, based on the assumption that the world manages to limit average global warming to 1.5C (2.7F) over pre-industrial levels, a team wrote in the journal Nature.

China Revives Plans for Real Estate Investment Trusts, Report Says – Caixin Global The China Securities Regulatory Commission (CSRC) is accelerating the drafting of rules that will allow REITs to be sold to individual investors, the Economic Information Daily, a newspaper owned by the official Xinhua News Agency, reported on Wednesday without citing anyone. Trusts whose underlying assets are privately owned and government-provided rental housing will be the first to get the green light, it said.

China Moves to Evict Trademark Squatters – Caixin Global The planned database seeks to address the millions of product names that have been registered but left idle, according to Cui Shoudong, a deputy head of China’s State Administration for Industry and Commerce (SAIC). The move could also help foreign firms that have seen rampant appropriation of their respective brands.

Huishan Dairy’s Financial Troubles Deepen – Caixin Global China Huishan Dairy, the milk producer buried under a 26.73 billion yuan ($4.09 billion) mountain of debt, is facing more trouble now that one of its bankers is demanding the immediate repayment of a total of $220 million in outstanding loans and unpaid interest. The country’s biggest dairy farm operator, whose Hong Kong-listed shares have been suspended since March, said it was taking legal advice on the demands made by HSBC Holdings PLC, and that any repayment would need to be considered with its existing debt-restructuring proposals — currently the subject of negotiations with its main creditors in China.

Opaque Chinese oil group makes clear gains in former Soviet bloc – FT $$ CEFC is no ordinary private company. Ye Jianming, the group’s chairman, sponsors a pro-China think-tank with ties to retired military intelligence officers, and does business with the military’s “princeling” elite. CEFC’s rise from its roots in Fujian province corresponds roughly with President Xi Jinping’s political ascent. Despite being an outlier as a private investor in China’s closed oil sector, the company’s global dealmaking has corresponded with Mr Xi’s state visits.

Lotte Shopping picks Goldman to manage sales of supermarkets in China – Reuters It has not been decided whether the retailer will sell all its China supermarkets or part of them, a Lotte official said. Of Lotte’s 99 Mart stores in China, 74 were shut down by fire authorities over safety violations such as boxes blocking exit doors. Another 13 stores were shut down because of difficult business conditions.

独家 | 铁路局改革揭幕 禁止任何形式裁员公司频道财新网 中铁总在内部强调，路局改革过程中禁止任何形式裁员，现有职工全部进入改制后公司，相关社保、企业年金及公积金关系变更至新公司，职工待遇不变 // Comment: No layoffs permitted as part of the reform of China National Railways Corp–Caixin

China’s draft court law | Supreme People’s Court Monitor A draft of the first comprehensive overhaul of China’s court law since 1979 (the organic/organizational law of the people’s courts) is now open for public comment (until 4 October. A translation of the draft is available at Chinalawtranslate.com (many thanks to those who made it possible). A translation of the current law is here and an explanation of the amendments has also been published. The draft is significantly longer than the earlier version of the law (66 vs. 40 articles). It retains much of the framework of the old law, incorporates legislative changes as well many of the judicial reforms, particularly since the Third and Fourth Plenums, and leaves some flexibility for future reforms.

‘Farewell’: Qiao Mu, dissenting academic, leaves China for US | World news | The Guardian Qiao Mu had always insisted he would not be forced to leave China. “We must change our nation, not our nationality,” the outspoken academic told the Guardian over lunch in the summer of 2015. Last Friday morning, however, Qiao and his family set off for Beijing’s international airport to catch a Boeing 777 bound for the United States.// Comment: Has he moved to DC?

中央将精确打击公务员这80类行为 千万别踩红线|公务员|公款|出国_新浪新闻Comment: list of 80 things that civil servants are not allowed to do…central government knows that unless you spell out prohibitions in excruciating detail officials will always say “well it was not explicitly forbidden”…

Time to prepare for the worst in North Korea | East Asia Forum – Jia Qingguo When war becomes a real possibility, China must be prepared. And, with this in mind, China must be more willing to consider talks with concerned countries on contingency plans.The United States and South Korea have long tried to persuade China to hold talks on contingency planning. So far Beijing has resisted the idea for fear of upsetting and alienating Pyongyang. But, given recent developments, Beijing may have no better choice than to start talking with Washington and Seoul.–Jia Qingguo is Professor of diplomacy and international relations and Dean of the School of International Studies, Peking University.

China, Brunei to boost ties – Xinhua Chinese President Xi Jinping held talks with Brunei’s Sultan Haji Hassanal Bolkiah here on Wednesday, with the two agreeing to promote cooperation within the Belt and Road Initiative, and work for stronger bilateral ties. “China appreciates Brunei’s efforts in strengthening China-ASEAN relations, and hopes to align the Belt and Road Initiative with ASEAN’s development plan,” Xi said.

Two senior PLA officers get new appointments – Global Times According to the PLA Daily, the flagship newspaper of China’s military, Song Puxuan, the former commander of the Northern Theater Command, was appointed as the new head of the CMC Logistical Support Department, while his predecessor Zhao Keshi hosted the logistical meeting in Beijing as a member of the CPC Central Military Commission. Qin Shengxiang was reassigned as PLA Navy Political Commissar. He attended the departure ceremony in Qingdao, Shandong Province for the Chinese fleet which will join the joint China-Russia naval drills, Joint Sea 2017, navy.81.cn, the PLA Navy’s website, reported.

Reform brings China closer to strong army goal – China Military During those five years, China has advanced the reform of national defense and the armed forces under the leadership of the CPC Central Committee with Xi at its core, making historic steps in building a system of military strength with Chinese characteristics.

Lessons for today from the first Korean War – Kevin Peraino Nearly seven decades later — as a rogue member of the Kim dynasty once again threatens to upset the regional power balance — it is worth recalling the lessons of the last time North Korea and the United States stumbled into war. As in 1950, none of the big powers — frankly, nobody in their right mind — is eager for a renewed conflict on the Korean Peninsula. Still, the events of that fateful June remain a cautionary tale — a warning that, if nothing else, it only takes one really determined actor to spark a crisis.//Comment: Preaino’s book A Force So Swift: Mao, Truman, and the Birth of Modern China, 1949 comes out next week.

China sent a ship to the Arctic for science. Then state media announced a new trade route. – The Washington Post China’s state news agency Xinhua reported last week that a Chinese ship had conducted a successful test of a trading route along the long-fabled Arctic Northwest Passage. This was a major milestone, according to the agency, which proclaimed that “a new channel” between North America and Northeast Asia had been opened. The trip, which had seen a ship called the Xue Long (or “Snow Dragon”) travel for 2,293 nautical miles through the Canadian Arctic, had lasted for eight days and would provide “a wealth of navigation experience” for future Chinese ships, Xinhua reported.

Oxford launches program on Belt and Road Initiative – Xinhua A program on the Belt and Road Initiative was officially launched on Wednesday at Oxford University as a summit on the China-proposed initiative opened. Denis Galligan, the program director and a professor at Oxford’s Faculty of Law, said the program would include research devoted to the Belt and Road Initiative put forward by China some four years ago. // Comment: Who is funding this program?

Mountain park near North Korean border closed – Global Times “To ensure the safety and comfort of visitors, our staff is conducting a comprehensive safety inspection of the Changbai mountain south scenic spot, which we have temporarily closed to the public,” a notice read on the Sina Weibo account of the Jilin Provincial Tourism Development Committee on Wednesday night.

Japan and India Discuss Defense as China Gets Bolder – Bloomberg Japan is among the countries India contacted for information about cooperating on its plans for six diesel submarines to add to the underwater fleet it is seeking to build to counter that of China, in a project worth about 500 billion rupees ($7.8 billion). The two governments held their first round of talks on overall defense technology cooperation last week, but are not currently in negotiations on the submarine project, according to a Japanese foreign ministry official who asked not to be named.

India-Japan intimacy poses no real threat to China – Global Times After the Doklam standoff, more voices in the Indian media instigate the country to step up cooperation with the US and Japan against China and exaggerate the geopolitical significance of closer India-Japan ties. Yet this to a large degree has exposed the vulnerable feeling of the Indian strategic circle in front of China. They want to encourage themselves by calling for India’s alliance with the US and Japan to showcase India’s strategic potential to China. This suits the desperate needs of Indian society’s mentality.

Senior CPC leader to visit Vietnam, Cambodia – Xinhua | Senior Communist Party of China (CPC) leader Liu Yunshan will head a CPC delegation to pay official visits to Vietnam and Cambodia from Sept. 18 to 21, the International Department of the CPC Central Committee announced Wednesday.

Sino-Russian university alliance established – People’s Daily Online Forty Chinese universities, including Beijing’s Peking and Tsinghua universities, and 20 Russian universities, including Lomonosov Moscow State University, joined the alliance, which aims to strengthen exchanges in modern teaching methodology, scientific research, cultural and social activities.

Beijing gnaws at rule of law in Hong Kong | East Asia Forum The legal system in Hong Kong may remain a common law system, but the mere fact that a legal system is based on the common law does not — as Singapore demonstrates — ensure that its substantive content will adequately protect fundamental rights. The increasingly convoluted attempts by Hong Kong officials and mainland Chinese academics to argue that advocating for Hong Kong’s independence is not protected by freedom of expression is further evidence of a concerted push by Beijing to impose an authoritarian common law on Hong Kong.

Music Licensing Deal Puts Tencent, Alibaba in Harmony – Caixin GlobalUnder the deal, Tencent Music and Entertainment Group will allow songs it holds exclusive licensing rights for to be streamed by users of a rival service operated by Ali Music Group, the pair announced Tuesday. In exchange, Tencent will get similar rights for content licensed exclusively to Ali Music.

The Bearable Loneliness of China’s Solo Karaoke Booths – Sixth Tone Located in various spots that see heavy foot traffic, such as shopping malls, these KTV booths usually measure around 2 square meters. The tiny glass fortresses of solitude host an array of high-tech equipment: Rooms typically come with a large touch-screen display, two microphones, two sets of headphones, two high stools, and a handful of charging cables for customers’ mobile devices.

China May Own More Artificial Intelligence Patents Than US By Year-End – China Money Network China and the United States are both artificial intelligence superpowers. But China may soon be the clear leader, at least in terms of AI patents filed. The U.S. currently has more, with 35,508 AI patents, versus 34,345 for China. But as Chinese companies and scientists are filing AI patents at a faster pace, the nation is likely to hold more AI patents than the U.S. by year end, according to a report by Sequoia Capital China and Zhen Fund.

Ant Financial’s Agriculture Insurance Joint Venture Gets Regulatory Green Light – China Money Network Nonglian Zhongxin Technology Co., Ltd. will be 60% owned by China Insurance and 40% owned by Shanghai Yunxin Venture Capital Management Co, a wholly owned subsidiary of Ant Financial, which is a financial services affiliate of Alibaba Group. The joint venture between one of China’s financial technology leaders and China Insurance, an insurer founded in western Xinjiang province and now based in Beijing, will aim to meet increasing demand for insurance products driven by modernization of the agricultural sector.

Food And Travel

Manadarin Announces Luxury Hotel Project for Beijing Mandarin Oriental Qianmen, Beijing is located within the Qianmen East Hutong Quarter which is undergoing a process of preservation and regeneration. Hutongs date back to the 13th century and comprise traditional courtyard houses connected by narrow lanes and alleyways. The architectural style of the Beijing courtyard is unique to the hutongs of the capital city. The hotel will be dispersed throughout the Qianmen East Hutong Quarter alongside privately owned traditional residences, retail outlets, restaurants, bars and cultural venues.

China-India Relations: The Untold Story – Carnegie Endowment for International Peace – Sept 20 in DC Using new documents from China, Jonathan Ward will examine the little-known depths of the bilateral relationship. Ward will trace China-India relations from a period of ‘brotherhood’ between the two nations after their founding as modern states to the China-India Border War of 1962 on to today’s rivalry. As tensions abound from the Himalayas to the Indian Ocean region, Ward will discuss the possibility for reconciliation after Doklam, as well as the significance of the current trajectory of China-India relations for the United States and its allies. Jeff M. Smith will serve as a discussant, and Carnegie’s Ashley J. Tellis will moderate.